2012: The Year That Saved California High Speed Rail

This time last year, it wasn’t clear what would happen to high speed rail in the state legislature. The vote to release the voter-approved bonds was coming, and HSR opponents in Sacramento and around the state were working hard to block it and stop the project. By late June, we began to worry that HSR opponents just might have the votes to stop HSR.

But they failed. And the California high speed rail project survived.

Governor Jerry Brown signs the bill releasing the voter-approved high speed rail funds in July 2012 – photo from the Governor’s Office

Looking back on 2012, that vote was the most important HSR-related story of the year. Before the vote, the media was full of doom and gloom about the project, as calls to abandon it increased even as gas prices rose, reminding Californians of the value of electrified intercity rail.

Since then, high speed rail has gone from being a possibility to a certainty. You don’t hear many people saying we should abandon HSR anymore, at least not in Sacramento. The two leading HSR opponents, Joe Simitian and Alan Lowenthal, have been termed out of the legislature. Democrats now hold a 2/3 majority in both houses, so even if their caucus is not completely united behind HSR, they still have enough votes to continue passing HSR legislation. Stalwart HSR backers such as Cathleen Galgiani and Julia Brownley prevailed in close races for higher office, with Galgiani moving up to the State Senate, giving the project even more protection in the state capitol.

California HSR also prevailed in the courts in 2012. The lawsuit brought by several San Joaquin Valley farm bureaus appeared to be a loser as Judge Tim Frawley denied a restraining order and said he was “leaning toward ruling in favor of the state” when the full lawsuit is heard at trial on April 19. Since then, HSR opponents have been scrambling for a new legal strategy in hopes of somehow stopping the inevitable commencement of construction. Their final hope is a lawsuit accusing the California High Speed Rail Authority of violating Prop 1A by constructing the project in phases. But that suit doesn’t look promising for opponents either.

At the end of 2012, it seems clear that within California, at least, high speed rail’s position is strong. It was endorsed by voters at the November 2008 election, and weathered four subsequent years of criticism and attack. Once construction begins, either later in 2013 or in early 2014, most Californians will conclude HSR is a truly done deal and move on to other topics.

In Washington DC, however, threats to future phases of HSR construction remain. Republicans remain in control of the US House of Representatives and continue to try to defund HSR, led by Central Valley Republicans Jeff Denham and Kevin McCarthy. Their efforts to take away money and jobs from the Valley has met with strong denunciations from local newspapers, including the Sacramento Bee and the Bakersfield Californian.

Who knows what will happen with HSR in Congress. We may not see new federal funding until 2015, making it even more important for California to consider how to go it alone – and SPUR proposed ideas to do exactly that back in July.

HSR’s struggles in Congress should not be seen as a sign the project is flawed. Rather, it’s Congress itself that is a totally dysfunctional institution, as the absurd jockeying over the so-called “fiscal cliff” makes clear. Congress can no longer effectively govern this country or pass good legislation no matter the issue. HSR is merely falling victim to the same flawed processes that are affecting everything else in American life. It’s unlikely that HSR will fare better in Congress until the institution itself is fixed. And sadly, that isn’t likely to happen anytime soon.

Despite those ongoing problems, 2012 will be remembered as they year that saved California high speed rail. The project survived the numerous attacks thrown at it. HSR is coming to California, that much is now a certainty. The details still matter, and this blog and rail advocates across the state will continue to pay close attention to them, as we have for nearly five years.

Tomorrow we’ll take a look at what 2013 has in store for HSR. A hint: the new Democratic supermajority will be key.

I think 2013 should be the year that CAHSR should award contracts so we see someone start moving dirt and begin constructing the IOS. I’m tired of the political and legal wrangling and want to see the project leap from the drawingboard into life. This isn’t unknown territory.

Will 2013 bring the groundbreaking for the Xpress West high speed rail line construction between Las Vegas and Victorville? Which Las Vegas station site will be selected? Will Xpress West get the RRIF loan?

Who knows what will happen with HSR in Congress. We may not see new federal funding until 2015, making it even more important for California to consider how to go it alone – and SPUR proposed ideas to do exactly that back in July.

Missing is an oil extraction tax like small government, low tax Alaska and Texas. CA is the third largest oil producer state and we are missing billions in revenue not at the pup – the oil is taxed before it is put on the market to be sold anywhere.

Alaska under Sarah Palin increased the tax to 25%. Estimates for revenue with CA taxing at a low 6% (2006:prop 87 rate) would yield 1 Billion per year (2009 estimate).

More fundamentally, a tax on oil production is a tax on oil consumption. The difference with a gas tax is that a gas tax falls on Californians, whereas an oil extraction tax falls on oil consumers worldwide (on average, less wealthy than Californians). Both should be pursued, since it’s important to tax the ill effects of all fossil fuels, and this way oil is taxed if it is either produced or consumed in California, rather than just one of the two.

jimsf Reply:December 31st, 2012 at 7:59 pm

uhexcuse me but what about us regular not wealthy working folks who have no options to driving and cant afford these taxes are you going to pay our share

No, you’re not. Health care is paid out of pocket (about half, with or without Obamacare) and by general taxpayers, including those who have never driven a car. Not really fair that asthmatics have to pay for medications, lost days of work, and general suffering because of a condition caused by other people’s behavior.

Pre-Obamacare, your insurance premiums reflect your health situation, not the health situation that you inflict on other people. Post-Obamacare, your insurance premiums are independent of your preexisting conditions but also of the preexisting conditions your driving gave other people. If you hit someone, you’re liable for damages. The same principle needs to apply in case you emit pollution that contributes to people’s health problems.

jimsf Reply:December 31st, 2012 at 8:54 pm

oh bfd i suffer the consequences of all kindsof crap that other people do we all do thats life. you dont care about health you care about punishing in the name of ideology at least be honest about it dont bullshit.

Dude, you lived in San Francisco, and chose to move to the Central Valley. You could get to work. You just decided it was more convenient for you to pollute.

jimsf Reply:January 1st, 2013 at 12:50 pm

i moved out of sf because i could no longer afford to live there. and niether can millions of other californians. not only that itsnone of your business where people live. they live where they have too for jobs and costs of living.

what exactly do you suggest for all the millions of californians who live paycheck to paycheck as you nickel and dime their rent money away with regressive taxes? hmm?

jimsf Reply:January 1st, 2013 at 12:56 pm

are you seriously suggesting we force 40 million people to live on top of each other in sf because they can use muni? get real.
The average asking rent at buildings with at least 50 units in Oakland hit $1,925 in the third quarter, up 19 percent from the same time last year, RealFacts said. That figure averages rents for units ranging from studios to three bedrooms, but the trend is just as pronounced for each size. One-bedroom apartments, for instance, were asking $1,761, a 20.1 percent increase from a year ago, RealFacts said.
San Francisco’s already sky-high rents continued climbing, with a new average asking of $2,768 at big complexes, up 7.6 percent from a year ago. San Jose saw a 9.6 percent increase to an average of $1,845, RealFacts said.
Apartment hunters on both sides of the bay are reeling from sticker shock.

It’s interesting how you combine “I don’t care about Bangladesh” with “live paycheck to paycheck.” The difference between you and a bottom-of-the-1% American is a factor of what, 10? (I think you and I make about the same amount of money.) Well, between you and the average Bangladeshi it’s a factor of 25. Try to think how you’d react if someone who makes $400,000 a year complained that he can’t afford all the deduction caps in the fiscal cliff deal.

jimsf Reply:January 1st, 2013 at 1:34 pm

I dont live in bangladesh. I dont pay taxes in bangladesh and i dont vote in bagladesh. its not relevant. Im an american living on a take home pay of 550 a week. I have to pay a tax bill at the end of the year. I have zero savings including retirement. ( only mt rr pension to live on later) My car registration is 179 due tomorrow and i dont have it plus i have to pay for smog check. and you want to raise it.

I dont live in poverty but a tax increase of or any increase groceries gas whatever, of 100 bucks a month is significant. even more so for californians who make half what i do. you are an out of touch elitist period.

and again what do you say to the single working mom with two kids… sorry about the cost of milk and frosted flakes but we need an extra 100 from you to fund our idealism? youre out of touch mitt.

“You know how you have to take unpaid days off to stay home with your kids every time they get sick with asthma? Cleaner air means they won’t be sick as much. Your bus to work won’t get stuck in traffic as much, so your 90-minute one-way commute will drop to 45, and higher ridership will make it more frequent so you can start going to other destinations in town if you like.”

As for the rest, see, I’m not an American. Neither is 95% of the world. Wanna know why people hate you guys? It’s comments like the ones you keep making. You guys hurt people and don’t even care.

(550 a week is somewhat less than my current takehome, and somewhat more than my takehome in grad school, when I lived in Manhattan. But Vancouver charges higher sales taxes, so the difference is even smaller.)

Jon Reply:January 1st, 2013 at 8:18 pm

are you seriously suggesting we force 40 million people to live on top of each other in sf because they can use muni?

No reason for everyone to move to SF. Any city in California could be as dense and transit friendly as SF, and it would greatly improve the quality of life in those cities. The reason why most cities are not is simply geography- unlike SF they weren’t at the tip of a peninsula and could sprawl, so they did. No reason why that couldn’t be reversed with sensible zoning and investment in transit.

Living without a car is impractical in the valley, and that needs to change. That’s the carrot. A higher gas tax is the stick. One policy will not succeed without the other. You can’t price people out of their cars without offering an alternative, but no-one will take that alternative if it is easier not to.

I don’t want everyone in Fresno to move to SF, I want Fresno to become as awesome as SF so they don’t have to. Yes, the change will be painful for some, but change is essential if we are to survive the next century, and quality of life will be better at the end of it.

jimsf Reply:December 31st, 2012 at 8:47 pm

who cares about canada and nebraska anyway.

jimsf Reply:December 31st, 2012 at 8:48 pm

or bangladesh for that matter. if the environmenalists hadnt killed nuclear power in the us we wouldnt be so dependant on oilnow

D. P. Lubic Reply:December 31st, 2012 at 9:31 pm

“I the environmentalists hadn’t killed nuclear power in the us, we wouldn’t be so dependant on oil now.”

Not so sure about that. Nuclear power generates electricity, and outside of plugged in electric cars and of course electric railroads, it’s not used in transportation. On the other hand, transportation is about 90% or better oil dependent, and makes up something like 60% of our oil demand, with motor fuel being about half of that. For comparison, electric power generation with oil is something like 3% of oil demand, and is also about 3% of generating capacity, too. Most of that is in the Northeast, but I understand there are some very small and isolated towns in California that aren’t on the grid, and rely on a local diesel generating plant.

Wdobner Reply:December 31st, 2012 at 11:42 pm

D.P, there are a number of gas to liquid processes that could be utilized to convert feedstock into room temperature petroleum fuels with the input of energy from a variety of sources, including nuclear power. Among them, the Fischer Tropsh process, the Mobil process, and coal liquifaction through the Karrik process. IMHO particularly interesting is the Green Freedom proposal from LANL which would use atmospheric carbon dioxide as the feedstock for hydrocarbon fuel production with energy being supplied by nuclear reactors.

That’s not to say our nuclear sector would have thrived if it had been able to deliver domestically sourced, carbon neutral petroleum fuels. Oil production certainly wouldn’t have saved the nuclear sector during the oil glut, right after Three Mile Island and Chernobyl, when the industry needed the most help.

Going a bit OT here, but it’s difficult to lay all the blame for the stagnation and decline of the US nuclear industry at the feet of the environmentalists. The nuclear industry itself is certainly culpable. They’ve built their industry around fundamentally unstable light water reactors which burn a tiny fraction of their fuel (which is itself about as rare as platinum or gold), and the breeder alternatives they put forward raise the prospect of nuclear proliferation. IMHO the environmentalists have served as an effective check and balance on an industry which is virtually hidebound. Worse, they’ve entered a period of retrenchment, where those modern reactors which are proposed are nothing more than modifications on 40 year old designs. Until they address passive cooling requirements, pressure vessels, burn up fractions, and other problems with their light water reactors (all of which have been solved in other reactor designs) there’s little point to putting all our eggs in their baskets.

joe Reply:January 1st, 2013 at 10:23 am

“Going a bit OT here, but it’s difficult to lay all the blame for the stagnation and decline of the US nuclear industry at the feet of the environmentalists.”

Nuclear failed on it’s own – Environmentalists are a red herring. If Nuclear were profitable and not requiring massive investment, risk and Gov subsidy, we’d be Nuclear right now. We frack because it is profitable despite long term environmental damage.

I wish opposition to fracking were as successful as to nuclear (and that’s mixed success anyway). The problem is that fracking happens in out-of-the-way places: Upstate New York’s Southern Tier, the Appalachian parts of Pennsylvania, and other forgotten parts of the US. It’s the same with mountaintop removal in West Virginia – the people affected are in areas so depressed and out of the way that even the proud Real Americans of the Midwest don’t care about them, much less the mainline urban-liberal environmental movement. In contrast, nuclear power plants are located in major metro areas, and so they affect normative urban and suburban people.

jimsf Reply:December 31st, 2012 at 8:16 pm

infrastructure should be in the defense budget 10 percent of it

joe Reply:December 31st, 2012 at 10:14 pm

regressive taxes like tolls for cars in the SPUR plan produce less revenue than the extraction tax at six percent.

John Burrows Reply:December 31st, 2012 at 10:09 pm

If, as reports suggest, California can extract anywhere near another 14 billion barrels of oil out of the Monterey Shale by fracking, then that $1 billion per year oil extraction tax estimate could prove to be way too low.

I would not count on that oil getting extracted. Fracking is going to be a huge political issue in 2013. I doubt I’ll cover it much here, but it will be big news elsewhere.

John Burrows Reply:January 1st, 2013 at 6:24 pm

In 1986 California was producing over a million barrels of oil per day, twice what we are now. Fracking in addition to other methods of boosting oil recovery could, over a period of years, reverse this decline in production. In the San Joaquin and Sacramento Valleys as well as in the arid foothills of the West Side of the Valley, fracking will probably not meet with the same resistance as it would in a place like San Mateo County where there has been some interest in taking another look at the small La Honda oil fields.

And it looks like North Dakota is now number 3 in oil production.

joe Reply:January 1st, 2013 at 10:26 am

1 Billion at 6% rate with extraction at 2008-9 level.

Alaska taxes at a 25% rate. So that’s 4 Billion if you extrapolate to Alaska’s rate.

And drilling in remote Alaska with wide temp extremes and tundra is far more difficult than CA.

With consumption at July 2012 levels, you get 17 billion gallons consumed per year. $4/gal –> $68 billion per year in principle, less in practice because of (highly desired) changes in behavior.

joe Reply:January 1st, 2013 at 11:52 am

Not sure what you mean. The tax is on oil extracted and sold on the global oil market.
25% of the $111 a barrel for 2012.
CA produced 533 thousand barrels per day at the end of 2012 which extrapolated at that value is 14,790,750 a day

So HSR would get 5,398,623,750 for 2012.

As it is extracted and sold, CA get funds to build and expand HSR. It’s not regressive since it is not a pump tax paid by consumers. The tax adds cost to extract oil and might diminish extraction rates in the short term but the global market is what pays the tax.

Here’s how the US deals with oil extraction taxes in other countries. In 2002, some people within Israel proposed to raise oil and gas profit royalties in advance of offshore gas exploration efforts (the preexisting rate was 12.5%, one of the lowest in the world, fixed at a time nobody thought the country had any resources to speak of). Because of behind-the-scenes American pressure, this was not done. Around 2010, large quantities of gas were found, leading to new calls for higher royalties. The prime minister is US-educated and absorbed Reaganite and neoconservative governance ideas, and the Obama administration pressured the Israeli government not to raise the royalties. A local oil tycoon even ran ads saying that the left’s call for high royalties was a conspiracy to prevent Israel from becoming energy-independent. The government studied the issue, but the committee progressively weakened its conclusions, so that instead of 80% of the profits going to the public, if you total royalties and taxes it’s only about 55%, but the government will provide security with public funds so it’s actually less.

So de facto, an oil extraction tax means US corporations get to loot other countries’ oil and gas without paying much to the host country and American consumers get to drive longer and faster for cheap, while non-Americans have to pay for oil extraction in the US.

The question is, can Americans even live without the enormous imperial privileges they have? Are you guys even aware of those privileges?

joe Reply:January 1st, 2013 at 5:03 pm

The price paid for oil pumped out of Alaska is the same as the oil pumped out of California.

Alaska gets a share of the profit via the Tax but CA does not do not so the party hurt is the itty-bitty oil company.

If we tax the oil the price does not go up – it just changes the short term economics for pumping.

Note that the cost to make the oil is 0.0. It’s a natural resource. The cost is not passed on. If the tax make oil less profitable then it can be extracted at some future date. The lease if on public land can be recycled to a different company.

The cost of drilling for oil is not zero. It can be high or low, depending on how accessible it is with present technology. Tar sands and oil shale are more expensive to mine, which is why they were untapped until recently. The oil from them is not more expensive retail than cheap Saudi crude because of economic competition, but overall making oil more expensive to produce makes it more expensive to consumers. Alaska’s extraction tax raises the price of all oil in the world, on the margin, reducing Alaskan oil profits and marginally raising non-Alaskan oil profits. If Alaska were not part of the US, the US would most likely pressure it not to have such a tax, and if diplomacy failed the CIA could foment a coup.

bixnix Reply:January 1st, 2013 at 7:06 pm

An extraction tax in California would reduce the amount of oil pumped, reducing it from where market price equals the marginal cost of the last barrel of oil pumped, to the same point as Alaska, where market price would equal the cost of the oil plus the tax. Assuming California’s share of the world market is small, there would be little change to the worldwide price of oil and to the pocketbook of the California consumer; the tax revenue would come largely from the pocket of the oil companies that drill in California.

Assuming the California share of the worldwide oil market is small, the tax will still fall on global consumers – it’ll just be too small for each individual consumer to notice. But if everyone levies an extraction tax it’s equivalent to everyone levying a consumption tax.

So what you guys are saying is that the US should tax the rest of the world to build US infrastructure while also using military and diplomatic pressure on other countries not to do the same with their own resources.

bixnix Reply:January 2nd, 2013 at 10:16 am

Most of the tax burden won’t be on consumers – it’ll be from the oil companies, and felt by the stockholders. The revenue and profit of the oil companies will be reduced when the tax is introduced, thus impacting the value of their stocks. The tax’s effect on the world supply of oil would be minimal – so the price change, and the impact on consumers on the world market would be minimal as well. Other states and other countries have extraction taxes already in place.

As for the U.S.’s policy on social benefits derived from oil revenue, I agree with you that it varies widely. I don’t see any significant burden on consumers anywhere from a California extraction tax, though.

joe Reply:January 2nd, 2013 at 10:28 am

bixnix is right.

The oil tax comes out of oil company profit.

Amazingly oil is not manufactured, it is pumped out of the ground. The tax is part of the pumping cost, not a fee added to the buyer.

If the market is buying oil at 111 per barrel then that’s the price. A CA doesn’t increase the price of oil or change the price on the global market.

First, when other countries’ extraction taxes get too high, the US gets angry and sometimes attempts a military coup.

Second, I agree California’s policy is not a significant burden on consumers, by itself, because the costs are so widespread while the benefits are concentrated. By analogy, if California used American military power to extort $4 from each first-world inhabitant per year, it wouldn’t be a significant burden on anyone, and it would generate about $6 billion per year. Obviously an extraction tax is not extortion, and at any rate the burden falls on people who are engaging in harmful activity, but the money still comes out of other people’s pocket.

CA oil is not sold at the benchmark price, either Brent or WTI. Be careful with your numbers Joe, don;t get over excited about the yield on an extraction tax unles you price it per barrel and not as a percentage.

joe Reply:January 2nd, 2013 at 10:51 am

You’re right Paul. My calculation is simple and really not professional – It’s a comment section on a blog. It’s an illustration of SPUR’s failure to tax fairly. SPUR omits any oil tax despite Texas and Alaska using it to offset the tax burden on citizens.

SPUR’s regressive $4 highway tolls produce just under 10B in 20 years or 500M a year.

I could be off by a factor of 2 or 3 high. That’s still BILLION(s) for HSR and easily over the 500M SPURS taxes drivers.

Too often Transit Orgs want to appease corporate and wealth interests so they advocate plans that soak the consumer and tax repressively. SPUR can’t even bring itself to mimic how other oil producing states can reduce consumer burden by taxing oil.

You have to look at the entirety of a funding plan – not just the method of taxation, but what it buys. If the overall outcome benefits those with smaller incomes more than those with larger incomes, even if the taxing method is regressive, then the entire proposal is indeed progressive.

We need to stop playing the right-wing’s game of looking only at the tax and assuming it’s divorced from what you get in return for it.

joe Reply:January 1st, 2013 at 10:33 am

SPUR’s plan is regressive. That’s a problem (they admit it) and it’s not anti-transportation to call out regressive taxes for what they are – unfair and unnecessary.

SPUR’s plan taxes/tolls traffic on the HSR route which in my experience will push people against the project.

This tolling the route is another corporate tax policy – make the poor CV and middle class pay for the infrastructure and leave the wealthy and corporations alone. Bakersfield traffic to LA has to pay a 4.00 tax. That will hurt their economy and produces no benefit until the project finishes in 20 years.

I think SPUR is earning their corporate sponsorship. Not one peep on the Oil extraction tax or income tax or any progressive tax. None. Why not?

Organizational Members and Donors

Private, public and nonprofit entities supporting SPUR through membership and event sponsorships

An increase in the gas tax of 6 cents per gallon for 20 years (REGRESSIVE)

Road tolls of $4 per vehicle on six highways that parallel high-speed rail as it enters the Bay Area and Southern California (REGRESSIVE and the benefit for the tax is delayed until the project connects to CV to SF or LA).

An $8.50 increase in the annual vehicle license fee (VLF) for 20 years (REGRESSIVE)

A regional general obligation bond for green power for Caltrain and BART that also includes $1 billion for electrification and grade separation (BOND probably paid out of General fund in part by ridership)

$13 billion from the annual state cap-and-trade auction revenues until 2020 (TBD)

Why not? Use fees and such are a convenient way to charge people who cause damage to others when the damage is too diffuse for this to be settled in civil court. Using estimates coming from urban Canada, Australia, and New Zealand, the air pollution cost of driving is US$2-3 per gallon. So the average US car causes about $1,000-1,500’s worth of damage. Take a few thousand such cars together and they’ll kill someone from pollution, but an individual car doesn’t do much, so it’s pointless to sue. The purpose of pollution taxes is to bundle the relatively small cost imposed by each person.

So in that context, any tax that falls below the level of the correct damage estimate is a subsidy.

joe Reply:January 2nd, 2013 at 10:58 am

“Use fees and such are a convenient way to charge people”
Quite convenient and regressive.

We are foster parents. My reality of the impact fees have on people is probably different than yours.

I’m glad you can rationalize this by arguing about pollution. Here’s a bonus the poor drive very old and polluting producing cars. Crippling them further removes the worse polluting vehicles.

Off-topic, but less so that many other comments here: there’s a growing mass movement in Canada, spilling over to the US, by Native Americans who are pissed at how the government treats them. The immediate trigger is the Harper administration’s removal of environmental and community protections, aimed mainly at letting oil companies mine reservation land.

Well, I hope you will use the funds from the Wisconsin Hiawatha Service Extension to Madison in a wise fashion. It would benefit midwestern passenger rail advocates immensely if CA HSR avoided — and made strenuous efforts to show their work — cost overruns. Remember that the Long Knives are still out to terminate any passenger rail improvements. Also keep in mind that arguments against passenger rail find fertile ground among those who have never seen any need for train service in their daily lives, or who have never been aboard a train.

that would be great. theyve finally completed the hnf expressway to visalia which redeced the trip time from visalia by ten minutes. they just need complete the last few miles on the west end to i 5 coalinga